Benchmarking & Best Practices - Increasing Productivity & Warehouse Efficiency

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- Learn a step-by-step description of an ideal approach to benchmarking. - Why qualitative and quantitative benchmarking go hand-in-hand. - Steps to setting up a benchmarking program Presented by: Michael Mikitka, CEO, Warehousing Education & Research Council (WERC) November 28, 2012 - Consumer Goods Supply Chain Officer Summit 2012 - Shanghai Pudong, China

Text of Benchmarking & Best Practices - Increasing Productivity & Warehouse Efficiency

  • 1. Benchmarking&BestPractices IncreasingProductivity& WarehouseEfficiency ConsumerGoodsSupplyChainOfficerSummit2012 Shanghai,China1 www.werc.org
  • 2. InthissessionLearnastepbystepdescriptionofanidealapproachtobenchmarking. Whyqualitativeandquantitativebenchmarkinggohand inhand Stepstosettingupabenchmarkingprogram Keybenchmarkingresourcesinthesupplychainindustry www.werc.org
  • 3. Ifyoucantmeasureit, youcantmanageit. ~PeterDrucker3 www.werc.org
  • 4. BenchmarkingisTheprocessofimprovingperformance bycontinuouslyidentifying,understanding,andadaptingoutstandingpracticesandprocessesfoundinsideandoutside theorganization.Benchmarking(seeks)toimproveanygivenbusinessprocess byexploiting"bestpractices"ratherthanmerelymeasuringthebestperformance.Bestpracticesarethecauseofbestperformance.Studyingbestpracticesprovidesthegreatestopportunityforgainingastrategic,operational,andfinancialadvantage. TheAmericanProductivityandQualityCenter(APQC) www.werc.org
  • 5. Whatweknow Improve BottomLine Improve Metrics Improve Processes5 www.werc.org
  • 6. Howdoweknow? PercentageofCompanyRevenueSpentonDistributionActivities 0.72% Retail 1.80% 0.90% ConsumerProducts 4.40% 1.46% LifeSciences 3% 2% ThirdPartyWarehouses 6% 2.46% WholesaleDistribution 4.40% 2.60% ManufacturingGeneral 6.50% 0% 1% 2% 3% 4% 5% 6% 7% BestinClass MedianSource: 8th Annual DC Measures Study, 2011. www.werc.org
  • 7. QuantitativeBenchmarkingDataisGoodbutitisnotGoodEnough Quantitative Qualitative 7 www.werc.org
  • 8. LimitationsofTraditionalFinancialMeasures Financialmeasurestendtobelaggingindicators.LeadingIndicators(PerformanceDrivers) LaggingIndicators(Outcome) www.werc.org
  • 9. LeadingIndicators OntimeShipments PerfectOrderCompletion DocktoStockCycleTime,inHours OrderFillRate PalletsPicked&ShippedperHour DistributionCostsperUnitShipped PeakWarehouseCapacityUsed MaterialHandlingDamage PercentofOrderswithOntimeDeliveryTherearehundredsofmetricsreferenced acrossindustryassociations 9 www.werc.org
  • 10. The mostpopularmetricsare MetricInOrderofPopularity 2012 2011 Rank 2010 Rank 1.OnTimeShipments Customer 1 1 2.OrderPickingAccuracy Quality 3 2 3.AverageWarehouseCapacityUsed Capacity 2 4 4.DocktoStockCycleTime,inHours InboundOperations 5 6 5.InternalOrderCycleTime Customer 6 10 6.TotalOrderCycleTime Customer 7 NotinTop12 7.PeakWarehouseCapacityUsed Capacity 4 9 8.LinesPickedandShippedperHour OutboundOperations 8 11 9.AnnualWorkforceTurnover Employee 12 8 10.FillRate Line OutboundOperations 11 3 11.LinesReceivedandPutAwayperHour InboundOperations 9 NotinTop12 12.PercentofSupplierOrdersReceivedDamageFree InboundOperations 10 NotinTop12Source: 9th Annual DC Measures Study, 2012. www.werc.org
  • 11. SevenStepstoSuccessfulBenchmarking Step1: Setbenchmarking priorities Plan Step2: Identifythekeyprocessestobeassessed Measure Step3: Collectdata operationalandmanagerial Step4: Researchandcomparebestinclass performancetointernal andexternalstandardsCompare Step5: Identifygapsandreasonsforlowperformance Step6: Developanimprovementroadmapandset priorities Act Step 7: Closegapsandimprove/refineprocessesSupplyChainVisions Source:WERCsWarehouseManagersGuidetoBenchmarking,2nd Edition(2010) 11 www.werc.org
  • 12. Plan Step1:SetBenchmarkingPriorities Thebestplacetostartiswithavisionstatement andvalues. 12 www.werc.org
  • 13. Plan Step2:IdentifyKeyProcessesConsidernarrowingdownyourlistofwhatyouwouldliketobenchmarkagainst 13 www.werc.org
  • 14. MeasureStep3:CollectData Operational&Managerial Yourself(otherlocations) Customers Formalbenchmarkingservices IndustryAssociations 14 www.werc.org
  • 15. Measure TradeAssociations Networks Governments www.werc.org
  • 16. CompareQuantitativeStep4:Research&CompareBestinClassPerformance2012WERCDCMeasureReport 16 www.werc.org
  • 17. CompareQualitative17 www.werc.org
  • 18. Compare Step5:IdentifyGapsWithprocessstandardsyoucanrankselectedprocessesagainstthestandardandidentifytheprocesschangesrequiredtoachievethetarget Scoringofthe Receiving InspectionProcess isAssessedas InadequatePractice ReviewProcess AttributesandScore EachProcessGroup Source:WERCsWarehouseManagers GuidetoBenchmarking, 18 2nd Edition(2010)
  • 19. Compare Step5:IdentifyImprovementRoadmapWarehouse&Fulfillment:GapAnalysis P